July 27 (Bloomberg) -- Siemens AG’s supervisory board
members will meet this weekend to discuss the leadership of
Europe’s largest engineering company as investors and analysts
question how long Chief Executive Officer Peter Loescher can
keep his job.

Loescher, brought in in 2007 to clean up after the biggest
corruption scandal in German history, yesterday vowed to fight
on after cutting a profit forecast for the fifth time in his
six-year tenure. By contrast, competitor General Electric Co.
last week reported second-quarter profit that beat analyst
estimates, helped by a record order backlog.

“I’m underweight on Siemens and am glad that I am,” said
Carsten Hilck, a fund manager at Union Investment, which holds
less than one percent of Siemens shares. The target cut “is not
unexpected. This sort of thing can always happen at Siemens and
it doesn’t seem to be getting any better.”

Austrian native Loescher, who joined Siemens from drugmaker
Merck & Co. as the first CEO hired from outside the company, has
presided over a failed push into environmentally friendly energy
which led to spiraling costs, while writing down the value of
acquisitions. Last year, he acknowledged that he had been slow
to react to the economic downturn and the company on July 25
pinned the latest forecast cut on “lower market expectations.”

‘Hasn’t Delivered’

Loescher told Sueddeutsche Zeitung yesterday that he won’t
resign and that his contract runs until 2017. A Siemens
spokesman confirmed Loescher’s comments on staying put while
declining to comment on speculation about his future.

German newspapers and magazines reported conflicting
information on potential successors to the CEO.

Chief Financial Officer Joe Kaeser and industry division
head Siegfried Russwurm could jointly replace Loescher,
Sueddeutsche said, without saying where it got the information.
While Kaeser is the favorite for the job, supervisory board
chairman Gerhard Cromme could act as CEO at least temporarily,
Die Welt reported today, without citing anyone. Der Spiegel said
Siemens weighed Russwurm, Kaeser as well as energy division
chief Michael Suess as candidates yesterday.

“Loescher just hasn’t delivered, I can well imagine that
he will go,” said Daniela Bergdolt of DSW, Germany’s largest
association for private investors, and who represented one
million shares at Siemens’s investor meeting, equivalent to 0.1
percent of the company’s shares. “The explanation is missing,
that’s my issue. General Electric says it’s the most wonderful
year that we can think of.”

GE Profit

Competitor GE last week said demand for jet engines and
oil-and-gas drilling equipment drove the order backlog to a
record. The Fairfield, Connecticut-based company also affirmed
its forecast for 2013 profit-margin expansion and industrial
revenue growth.

Siemens shares on July 25 dropped as much as 7.6 percent,
the biggest decline since March 2009, erasing 4.4 billion euros
of market value. Siemens has fallen 1.3 percent this year, while
ABB added 11 percent and GE gained 17 percent. Since Loescher
took over in 2007, Siemens shares have dropped about 23 percent.
The German DAX benchmark index has risen about 5 percent in the
same period.

Worker and shareholder representatives will meet separately
over the weekend to discuss the company’s leadership, according
to a person familiar with the plans.

Worker Criticism

Loescher is also facing criticism from his own workers. In
anonymous postings on Siemens’ internal discussion forum,
employees last week called for Kaeser to replace Peter Loescher
as chief executive officer, according to screenshots obtained by
Bloomberg News.

The company this week forbade unattributed postings on the
web forum, and said in an internal document the move is not
related to the “allegedly poor opinion among employees towards
Peter Loescher.”

A Siemens spokesman declined to comment on the talks
between supervisory board members, the internal forum and
guidelines for employees.

Loescher on July 25 said that Siemens no longer predicts an
operating profit margin of at least 12 percent of sales in the
12 months through September 2014. The profit goal was set last
November as part of a 6 billion-euro savings plan. Siemens had a
profit margin of 9.5 percent in 2012, when ABB and GE had
margins of 10.3 percent and 15 percent respectively.

The forecast was cut after a majority of units said in
their internal predictions that they will probably miss their
goals, two people familiar with the matter said. The gap in so-called sector profit between the forecast and the actual numbers
is currently 1.5 billion euros, one person said.

Profitability Efforts

Loescher told employees this year that it’s fair to judge
him on his efforts to improve profitability at Siemens, which
was Germany’s biggest company by market capitalization between
July 2009 and July 2012 before it was overtaken by software
maker SAP AG.

Thornburg Investment, which at the end of May had the 13th
biggest Siemens shareholding, according to data compiled by
Bloomberg, sold its stake, Managing Director Bill Fries said by
phone. “We changed our view,” he said.

Siemens fiscal third-quarter profit for the three months
through June has been hurt by about 100 million euros in costs
for faulty wind turbines, people familiar with the matter said.
Siemens is scheduled to report fiscal third-quarter earnings on
Aug. 1. The supervisory board will meet in its entirety one day
beforehand, according to one person familiar with the matter.

The new charges add to provisions of 550 million euros for
offshore power transmission problems and delays in train
deliveries reported earlier this year. In June, Siemens said it
will close its solar power unit following losses of at least 784
million euros since 2011. The unit could trim earnings by 500
million euros this year, it said in May.

Economic Headwinds

“The admission their operational restructuring won’t be
able to lift their Sector EBIT margins back to their 2011 levels
is likely to result in many investors stepping back,” William
Blair & Co. analyst Nicholas Heymann, who rates Siemens market
perform, said. “Siemens has got an inertia factor as it reworks
its portfolio while ABB is as adept as you can get.”

Loescher has said that his job at Siemens isn’t made easier
by the economic headwind he’s facing.

“We are missing a growth engine around the world,”
Loescher said in a Bloomberg Television interview in May.

ABB, the world’s largest maker of power transformers, said
that second-quarter orders fell 7 percent from a year earlier to
$9.3 billion as lower power-utility investments in Europe
weighed on orders. At the same time, ABB reported a 16 percent
increase in net income and kept its 2013 forecast.

Following Siemens’ latest forecast cut, the pressure on
Loescher will continue to increase, said Kronberg, Germany-based
Fairesearch analyst Heinz Steffen.

“Loescher will again be in the line of fire,” he said.
“There just has been no progress.”